Financial Results for the First Half of the
Fiscal Year Ending March 31, 2019
November 6, 2018
TOKAI Holdings Corporation(Code: 3167)

Overview of 1H FY03/19

Katsuhiko Tokita
President & CEO
TOKAI Holdings Corporation1

Essential points of 1H FY03/19 financial results
Despite influence of higher temperatures and rising procurement costs in LP gas
business, TOKAI made steady progress overall.

◎ 35% YoY net increase in customer count, which represents ourearnings base
– Customer count at end-1H FY03/19 was 2.89 million, an increase of 17,000 (+0.6%)
customers over the 2.88 million at the beginning of FY03/19.
– Net increase was 35% higher than 1H FY03/18 (13,000 customers), further expanding
our earnings base.

◎ Sales increased 3.9 billion yen (+4.6%) YoY to 88.8 billion yen, a record
high, as operating profit rose 11.6%, a double-digit increase.
– Sales reached an all-time high due to the successful investments to grow business in
FY03/18, as well as sales growth stemming from a higher customer count and M&A
effects.
– In terms of profit, despite the impact of higher temperatures on LP gas sales volume,the customer count increased, resulting in a double-digit growth in profit.

2

Overview of 1H FY03/19

3

Medium-term management plan targets twofold
increase in four years compared with FY03/17
Aggressive plan targeting sales of 339.3 billion yen, 1.9 times higher than FY03/17, operating
profit of 22.5 billion yen,1.8 times higher than FY03/17, and over 4.32 million customers, 1.7
times higher than FY03/17
Plan targets 2.6 times higher interest-bearing debt/EBITDA ratio, equity ratio of 31.6%, andROE of 13.0% with emphasis on capital efficiency
Billions of yen

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

Results

Plan

Plan

Plan

Plan

Sales

178.6

189.4

202.0

224.4

(1.9 times)

339.3

Operating profit

12.8

11.4

14.0

16.2

(1.8 times)

22.5

Net income

7.3

6.4

7.9

8.7

(1.6 times)

11.5

Total assets

161.1

169.8

173.8

191.2

(1.8 times)

283.4

1.9 times

2.0 times

1.7times

1.8 times

2.6 times

Equity ratio

34.5%

33.9%

35.6%

34.9%

31.6%

ROE

15.2%

11.1%

12.8%

13.0%

13.0%

Customer count(Million customers)

2.56

2.88

2.99

3.72

Interest-bearing debt/EBITDA ratio(1.7 times)

4.32 or more

* Figures in ( ) represent comparison with FY03/17.

4

M&A strategy under Innovation Plan 2020 “JUMP”
During the four-year period starting FY03/18, the following M&A strategies will be
implemented to accelerate growth.

Invest 100 billion yen over four-year period
Strengthen core businesses
Further expand LP gas, city gas, CATV, and information and communications service
businesses.
Expand customer base through M&A and alliances.

Acquire new services
Acquire new services to drive future growth.
Focus efforts on acquisitions as well as capital alliances.

5

Results of M&A in 1H FY03/19

6

First steps toward wide-area deployment of gas
business
Concluded agreement on transfer of gas business managed by Shimonita-machi in Gunma
Prefecture in April 2018, received approval from the Kanto Bureau of Economy, Trade andIndustry in October. Handover will take place in April 2019.
Taking first steps toward wide-area deployment of city gas business
Intends to use this opportunity to further expand the scope of city gas business

Concluded Shimonita-machi gas business
transfer agreement
Business transfer approved in October 2018
Handover will take place in April 2019

Shimonita-machi(Gunma Prefecture)

Wide-area deployment ofcity gas business
7Creating synergy in information and communications
services business
CYZE Inc., a developer and provider of survey systems, became a consolidated subsidiary.
Commenced a capital and business alliance agreement with Tripleize Co., Ltd., which has
strengths in cutting-edge technologies including AI, IoT, and the blockchain
Aims to create synergy by combining mutual strengths, further expanding and enhancing
the Group’s information and communications services business(Strengths/field)
In-house developed survey
systems
Customized support centeredon highly scalable,
proprietarily developed
systems

Capitalalliance

M&A(Strengths/field)
Network line services
Data center operations
services
System development(Strength/field)
Cutting-edge technologies
including AI, IoT, and theblockchain

Combine mutual strengths to create synergy
Further expand and enhance the Group’s informationand communications services business8

Initiated considerations with regard to entering new
business areas
In August 2018, commenced capital and business alliance agreement with new power
venture operator Minna-denryoku, Inc., began full-fledged consideration with regard toentering the renewable energy business
From 2019, the number of solar power generation systems reaching maturity under the
feed-in-tariff (FIT) system will increase, which is expected to result in more companies
choosing renewable energy from the perspectives of RE100*1, ESG*2, and CSR.
Leverage Minna-denryoku technologies and expertise, link to the Group businesses
Social Energy Company

Capital alliance
Minna-denryoku

Industry-leading renewable energy rates
Proprietary power trading platform

Enter renewable energy business

Leverage Minna-denryoku technologies andexpertise to sell and provide renewable energy

Renewable energy business1. International corporate initiative whereby member companies engage in generating 100% of the energy they use from renewable energy sources
2. Stands for Environment, Social, and Governance, used as an indicator to determine if companies can grow sustainably

9

ABCIR+S Strategy Progress

An acronym formed by the first letters of AI, big data, cloud, IoT, robotics,
and smartphones. It refers to the Group’s strategy for technological reform.

10

ABCIR+S strategy deliberation progress
In addition to marketing capabilities accumulated since the Company was founded, theuse of “ABCIR+S” to focus efforts on strengthening customer contact, developing new
businesses, and improving operational efficiency will be an important strategy going
forward.
Deliberations are being advanced by a dedicated organization, the Head office for nextgeneration business strategy.
ABCIR+S concept
IoT

Marketingcapabilities

CATV

Cloud

SurveillancecameraBig data
AI
Network(traditional strength)
AI speaker

Robotics
Smartphone

Dedicated organization “Head office for next-generation business strategy” will
use ABCIR+S to focus efforts on strengthening customer contact, developing
new businesses, and improving operational efficiency.

11

Creating new marketing methods
Began distribution of TLC smartphone app in October 2018
Timely provision of the Group’s service, campaign, and event information to enhance TLC
user convenience by enabling members to confirm and use their accumulated TLC points
Launched creation of digital marketing platform as base for converting customer behavior
into big data within owned media and realizing marketing in line with customer attributes
and preferences
TLC: Total Life Concierge

TLC smartphone app

Digitalmarketing platform

Sales

Sales

TLC member
service website

Customerdata base

Data
link

DigitalmarketingtoolService websites

Sales

Sales

12

Essential Points of 1H FY03/19
Financial Results

13Net increase in customer count up
by double-digit YoY◎ 1H saw a net increase in customer count of 17,303, up 34.9% YoY.
◎ Mainstay LP Gas and CATV businesses substantially contributed to the increase in customer count.
◎ From Q3 onward, TOKAI plans to accelerate the pace of net increase in customer count to achieve
an annual net increase of 64,000 (+62% YoY).
Customers

Thousands of customers+35,764

CATV+28,839

Of which:
LP Gas+9,011

CATV+14,357

2.94 million

Of which:
LP Gas+47
Customers+39

2.89 million

+17

+27

+10

+7
+6

+64

+13
+7

Q1

Q2

*Excludes increases in customer count resulting from M&A

1H
FY03/18

2H

Full-year

FY03/19

14

Double-digit increase YoY in all profit categories◎ Posted record high 1H sales thanks to an increase in customer count and effects of M&A conducted in
FY03/18◎ Profit was up 400 million yen (+11.6%) YoY on greater number of monthly fee-paying customers
accompanying an increase in customer count.
◎ Excluding the impact of lower LP gas sales volume due to higher temperatures and higher LP gas
procurement costs, TOKAI made steady progress toward forecasts.
Millions of yen

1H FY03/19
Results

1H FY03/18
Results

Sales

88,84084,911

Operating profit

3,475

Recurring profit

1H FY03/19
Forecasts

YoY

Versus Forecasts
ChangePercent
Change90,100 +3,929+4.6 -1,260

-1.4

3,114

3,700

+361

+11.6

-225

-6.1

3,580

3,143

3,650

+437

+13.9

-70

-1.9

Net income

1,736

1,246

1,890

+490

+39.3

-154

-8.1

EPS (Yen)

13.26

9.76

14.43

+3.50

+35.9

-1.17

-8.1

ChangePercent
Change15

Large increase in monthly fee-paying customers
in mainstay businesses◎ Earnings grow on an increase in monthly fee-paying customers due to rising customer count, whichforms the Company’s earnings base.
Monthly fee-paying customers(Thousands of customers)

1,957

5,156
1,909

5,040

3,010

1,844
+1.16 million customers(+28.8%)+0.13 million customers(+4.6%)

2,950

1,711

4,539

+0.49 million customers(+33.0%)2,908
2,878 2,878

1H

2H

FY03/17

4,002 4,039

1H

2H

FY03/18

1H

1H

FY03/19

2H

1,471

1H

FY03/17

LP gas business

2H

FY03/18

1H

1H

FY03/192H

FY03/17

CATV business

1H

2H

FY03/18

1H
FY03/19

Hikari Collaboration

16

Factors causing operating profit increase in 1H◎ Customer count grew from 2.83 million at end-1H FY03/18 to 2.89 million at end-1H FY03/19, an
increase of 60,000 customers. Customer growth pushed up operating profit by 1.1 billion yen and
LIBMO (TOKAI-brand MVNO service) improved 100 million yen.
◎ At the same time, non-sales activities resulted in costs of 900 million yen. (Procurement cost impacts
will be countered in 2H.)
Sales activity results

45

Increased profit

43

+0.1

41

Communication
MVNO

39

LIBMO
sales
+0.1
promotion

37
35
33

+1.1

Advanced costs-0.3

Non-sales activities

40

High
temperature
impactGas

Customers

2.83 million+0.1
Customer growth
Gas

3.1

27

2.89 million

-0.6

-0.3

Customers

31
29

Billions of yen

Non-sales activity factors

CATV
HikariCollaboration
Aqua

+0.2
+0.6

Procurement
cost impact
Gas

-0.6

3.5

Other

+0.1

+0.1
+0.2

25

1H FY03/18
Results

1H FY03/19
Results

17

Promotion of growth investment on the
background of equity enhancement◎ Additional 0.8pp increase in equity ratio◎ Despite increased operating profit and reduced corporate and other tax payments, as well as atemporary decrease in debt recovery amounts and increased debt payments, free cash flow
declined but the interest-bearing debt/EBITDA ratio remained at 1.9 times, the same level as March
31, 2018.

36.3

Equity ratio%

As of March 31, 2018

51.0

Interest-bearing debt balancebillion yen

As of March 31, 2018

7.9

Operating cash flow

billion yen

1H FY03/17(6.9)

Investing cash flow

billion yen

1H FY03/17

1.0Free cash flow

billion yen

1H FY03/17

Interest-bearing debt/EBITDA ratio

1.9

times

FY03/18

37.1

➡

%

As of September 30, 2018

54.9

➡

billion yen

As of September 30, 2018

➡

7.2

➡

(7.0)

➡

0.2

➡

1.9

billion yen

1H FY03/18
billion yen

1H FY03/18
billion yen

1H FY03/18
times

1H FY03/19

18

Note: Interest-bearing debt/EBITDA ratio for 1H FY03/19 is based on the full-year EBITDA forecast.

Targets record profits in FY03/19◎ Plans to post first record profits for all profit categories in two years with the success of aggressive
investments to expand customer base in FY03/18◎ Expects a 2.1 billion yen increase in profits on an increase in the number of monthly fee-paying
customers owing to efforts to increase customer count in the current and previous fiscal years, andprojects a further increase of 3.0 billion yen in profits on reduced upfront spending
Millions of yen

YoY

FY03/19 Forecasts FY03/18 Results(April 1, 2018 toMarch 31, 2019)(April 1, 2017 toMarch 31, 2018)

ChangePercent Change

195,600

186,069+9,531+5.1%

Operating profit

13,96010,971+2,989+27.2%

Recurring profit

13,88011,191+2,689+24.0%Net income

7,920

6,620

+1,300+19.6%EPS (Yen)

60.48

51.19

+9.30

+18.2%

Sales

19

Policy of consistently providing stable dividends◎ No change was made to the dividend forecasts (announced May 8, 2018).
◎ Plans to pay an annual dividend of 28 yen per share

28 yenper share30

per share

28 yenper share

14

14

14

14

FY03/18

FY03/19(Forecast)

6

25

20

15

28 yen12 yen12 yen12 yen12 yen14 yenper share8

per shareper shareper shareper share

6

6

6

6

10

11

11

5

6

6

6

6

6

FY03/12

FY03/13

FY03/14

FY03/15

FY03/160Interim dividend

Year-end dividend

FY03/17

Commemorative dividend

20Group CATV Business Strategy

21

CATV business overview◎ With a business scale comprising sales of 28.4 billion yen (15%) and operating profit of 3.6 billion yen(33%), positioned as one of the Group’s core businesses◎ With 1.05 million customers, accounts for 36% of overall, a business with largest customer count in
the Group

19.8
(11%)

28.4

4.7
(3%)
6.2
(3%)

0.02
(1%)

0.3
(3%)
0.2
1.3
(2%)
(12%)

76.1
(41%)

Sales

0.16
(5%)
0.67
(23%)

Operating profit

3.6 11.0 billion yen(15%) 186.1 billion yen(33%)(FY03/18 results)

50.9
(27%)

7.4
(67%)

1.05

Customercount

2.89 million(36%) (As of September 30, 2018)(FY03/18 results)

1.00
(35%)

3.2
(29%)

Note: Before allocating overhead costs (pie chart: excluding adjustment amount).

Note: Communication services overlap in Information andCommunications Services and CATV businesses, thus
excluded from total value.

Gas and Petroleum

Information and Communications Services

Gas and Petroleum

Information and Communications Services

Gas

Information and Communications Services

CATV

Building and Real Estate

CATV

Building and Real Estate

CATV

Aqua

Aqua

OthersAqua

OthersOthers22

CATV business area expansion◎ Launched in 1988 with capital participation in a cable TV company in Numazu, Shizuoka Prefecture◎ Afterward, engaged in M&A to expand base with current business deployment in Shizuoka, Tokyo,
Kanagawa, Chiba, Nagano, and Okayama prefectures

LCV Corporation

Kurashiki Cable Television Inc.
Cable Television Tsuyama Co., Ltd.

Atsugi Isehara Cable Network Corporation

NaganoPrefecture

Tokyo Bay Network Co., Ltd.
Chiba
PrefectureTokyo

ShizuokaPrefecture

OkayamaPrefecture

TOKAI Cable Network Corporation
Toco Channel Shizuoka Corporation

Tokai fiber-optic network approximate line length: 6,000km

Kanagawa
Prefecture

Ichihara Community Network Television Corporation
EAST COMMUNICATIONS Company Limited

Broadcasts

0.78 million

Communications

0.27 million

Total

1.05 million

23

Customer base expansion◎ Expanded bases through M&A, leveraged the Group’s strength in marketing capabilities to increasecustomers; business has grown to one million customers◎ Customer count temporarily plateaued due to changes in the external environment such as the endof terrestrial broadcasts, but began growing again from 2015.
July 2017
Acquired shares in Tokyo Bay Network Co., Ltd.
February 2018
Acquired shares in Cable Television Tsuyama Co., Ltd.

1,046
November 2010
Acquired shares in Dream Wave Shizuoka K.K.

Existing customers
Customers acquired by M&A

December 2009
Acquired shares in LCV Corporation and Kurashiki Cable Television Inc.

May 2003
Acquired shares in EAST COMMUNICATIONS Company Limited

Terrestrial broadcasts end

October 1999
Took over the business of Atsugi
Isehara Cable Network
Corporation
April 1998
Acquired shares in
Ichihara Community
Network TelevisionCorporation

thousandcustomers

September 2006
Started provision of FTTH
service utilizing CATV
opticalnetwork
October 1998
Started provision of
CATV internet
service

9 thousand customers

24

Customer count and operating profit sincetransition to a holding company structure◎ Customer count and operating profit leveled off between 2011 and 2014 due to changes in theexternal environment, but have improved since 2015.
◎ In addition to M&A effects, operating profit increased substantiallyto 3.6 billion yen in FY03/18.

3.6

Thousand customers, millions of yen

2.8

2.3

273

2.0

1.8

1.7

693

690

710

733

759

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

1.3
722

691

FY03/12

FY03/13

Note: Operating income is before allocating overhead costs.

Existing customers

Customers acquired by M&A

Operating profit

25

Industry position◎ There are 315 CATV operators in Japan, if counting those operating as Group companies (such as
J:COM and TOKAI) as single operators.
◎ TOKAI CATV business is ranked 3rd in the industry within the urban CATV sales category and 6th
overall in the number of subscriber households.

CATV category sales
Rank

CATV subscriber households

Operator

Sales

Area

(millions of yen)

Rank

Operator

Subscribers

Area(households)

1

J:COM GroupTokyo G

246,359

1

J:COM GroupTokyo G

13,601,200

2CNCi Group

Aichi G

23,9302

CNCi Group

Aichi G

1,454,305

3

TCN Group

Shizuoka G

14,8383its communications

Tokyo, Kanagawa

899,953

4

its communications

Tokyo, Kanagawa

13,0944

K-Opticom

Osaka, Kyoto, Hyogo,
and others

820,924

5

Kintetsu Cable Network

Nara, Osaka

11,476

5

Bay Communications

Osaka

797,900

6

ZTV

Mie, Shiga,
Wakayama

11,119

6

TCN Group

Shizuoka G

774,803

7

Bay Communications

Osaka

6,644

7

CCJ Group(Community Network Center)(Community Network Center)

Mie G

304,154291,895

Mie G

6,514

8

ZTV

Mie, Shiga,
Wakayama

Nihon Network Service

Yamanashi

5,943

9

YOU TV

Kanagawa

240,438

Chupi COM Fureai

Hiroshima

5,490

10

Tokyo Cable NetworkTokyo

203,749

8

CCJ Group

9
10

～

～

Total (315 companies)—

Notes: From the Nikkei MJ (November 8, 2017 edition) published by Nikkei Inc.
Broadcast-related sales including broadcasts and multiple channels; excludes internet, installation, and subsidies～～

Total (315 companies)

25,237,287

Notes: From the Cable Yearbook 2018 published by SATEMAGA BI Inc. on October 15, 2017
Number of subscribers as of June 30, 2017
TOKAI subscribers as of March 31, 201826

Support for advanced broadcasting◎ From December 2018, new 4K and 8K satellite broadcasting will commence.
◎ New tuners and antenna will be required to view new 4K and 8K satellite broadcasting.
◎ In the CATV industry, broadcasts can be viewed without the addition of an antenna; policy is to meet
4K demand with advanced spread of 4K tuner TV sets and antennas.
Expanding demand for 4K
broadcast ahead of Tokyo
Olympics (Until July 2020)

End-FY03/21
4K TVs
19.77 million homes *1
4K broadcast adoption rate

40% level *2

End-March 201914.68 million homes *1

End-March 20172.46 million homes *1

FY03/17

FY03/18

Business
opportunity

FY03/19

December 2018: New 4K and 8K satellite broadcasts start ●FY03/20

4K tuner TV sets
(require special antenna)*1 Source: “Estimates ofHouseholds with 4K TV
Sets,” IT Navigator 2018,
Nomura Research InstituteTVs with no 4K tuner(require 4K tuner
and special antenna)*2 Fiscal 2020 figures forhouseholds with 4K TV sets
(54,107,000 homes)
calculated using data from
“Estimates of Households with
4K TV Sets,” IT Navigator
2018, Nomura ResearchInstitute and Household
Projections for Japan,
National Institute of Populationand Social Security Research

FY03/21

July 2020: Tokyo Olympics ●FY03/2227

TOKAI fiber-optic network◎ Promoting FTTH since 2006 in anticipation of the fusion of broadcasting and communications◎ Anticipates nearly 100% completion of broadcast optical network in our CATV area by FY03/21◎ Growth in broadcast and communications customers will contribute to business expansion going
forward
Broadcast optical network FTTH—Excels in distribution capabilities, damage resistance, and durability
Lay fiber-optic lines(unnecessary if communication lines already installed)

Headend(center facility)
CATV optical-fiber
main line
Various types ofbroadcasts received
through optical-fiber andother means

Increase center facilities,
add broadcast opticalfiber distribution
capabilities

Closure(optical branching device)

Coupler (optical branch)

User home

Increase installationof broadcast couplers

Use existing
communications FTTH
network for broadcast
distribution

Distribution
capability
2,600 MHzV-ONU

Install broadcast ONU on each house

Broadcast optical network rollout schedule
(%)

100
80
60

Broadcast optical network
almost 100% complete

40
20
0

FY03/17

FY03/18

TCN and EAST COMMUNICATIONS

FY03/19
Toco Channel

Ichihara

FY03/20
Kurashiki

Atsugi

FY03/21
LCV

28

Tsuyama

Alliances with major carriers◎ Steady growth in highly profitable FTTH service customers will drive expansion of business earnings
going forward◎ Differences in sales channels and user segments among alliances with major carriers creates a winwin scenario

Per device

Customer count projection(communications)

au Smart Value
TOKAI

au

Up to two years
Up to 2,000 yen/month discount(excluding tax)
au smartphoneor
au mobileor
4G LTE tablet

Thousand customers

More than two of any service

Win-win
210

230

SoftBank Ouchi-wari

260
TOKAI

Per device
Up to two years
Up to 2,000 yen/month discount(including tax)

SoftBank
SoftBank Smartphone
MobileTabletFY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21

29

Initiatives to enhance network added value◎ Aggressive efforts toward broadband wireless access (BWA), regional wireless network aimed at
improving public services and addressing regional information gaps
◎ At present, licenses have been acquired or agreements have been reached for obtaining licenses ineight cities/wards.

Regional BWA initiatives

Regional BWA progress
Progress

Municipality

Preproposal

Primary
proposal

Mobile router access point

ConsiderPreLicense
Approveding
approvalacquired
proposalIzunokuni City

Culture centers

Ward offices

Koto Ward
Chuo Ward

Branch offices

Numazu City
Yaizu City

Build disaster and crime prevention networks in conjunction
with local municipalities
Develop broadband infrastructure able to be used by regional
communities
Provide backup for community channel broadcasts

Ichihara City
Atsugi City
Kurashiki City
Scheduledin December

Shizuoka City

Note: Agreement with Shizuoka City to be signed in December

30

CATV embodies TLC vision◎ TOKAI’s basic strategy is based on the Total Life Concierge (TLC) concept of promoting multiple
contracts through community-based sales.
◎ Due to strong customer contacts, the CATV business serves as the basis for the TLC concept,
which promotes high multiple contract rates.
Multiple contract rate
24.4% (14% Companywide)

TLC vision
Total Life Concierge (TLC) services provide onestop services related to a variety of lifestyles.

City gas

LP gas

Housingequipment

Aqua

Nursing careCATV

ADSL/FTTH

BridalShizuokaPrefecture

24.4%

Among these, city gas and CATV customers have thehighest multiple contract rate with the Group’s otherservices, an effective TLC target.
Security

Mobile/MVNO

Insurance

One call center
One contract

CustomerElectricity

City gas

CATV

LP gas

37.0%

63.8%

22.8%

(As of September 30, 2018)

31

TOKAI Group’s CATV Business Prospects

Expand as business linking communities
to the future

Expand as business changing the futureof communities
32

The performance forecasts and forward-looking statements in these materials are based on
information currently available to the Company, and include potential risks and uncertainties.
Please be aware that due to changes in a variety of factors, actual results may differ
materially from the projections and other forward-looking statements in these materials.

Please contact us with any questions regarding these materials.
Public Relations and Investor Relations Office
TOKAI Holdings Corporation
Hamarikyu Intercity, 1-9-1 Kaigan Minato-ku, Tokyo 105-0022, Japan
Phone: +81-(0)3-5404-2891
FAX: +81-(0)3-5404-2786
http://tokaiholdings.co.jp/english/
e-mail: overseas_IR@tokaigroup.co.jp

33